California Attorney General Rob Bonta and the California Energy Commission have joined a coalition of 18 attorneys general and two governors in filing a lawsuit against the U.S. Department of Energy (DOE). The suit seeks to block a new DOE policy that limits funding for state-run energy programs by capping reimbursement for administrative and staffing costs.
The coalition argues that this cap will reduce states’ ability to maintain energy programs that support communities, especially those with fewer resources. They are asking the court to overturn the funding cap and restore previous reimbursement rates.
“DOE’s funding cap disrupts the very programs helping our communities with energy costs and the transition to clean power,” said Attorney General Bonta. “Slashing budgets will have both immediate and long-term consequences, especially for the underserved communities that rely on them most. This is about equity, sustainability, and basic energy security, and that’s why I, alongside a multistate coalition, am filing a lawsuit against the Trump Administration to halt this funding cap immediately.”
CEC Chair David Hochschild added: “DOE’s new reimbursement rate changes would undermine the federally funded state-run energy programs that help make our energy cleaner, more reliable and more affordable. We are challenging this policy change because it is unfair, unnecessary, and unlawful.”
Federal law has historically required agencies like DOE to negotiate fair reimbursement rates with states for running federally funded programs. However, on May 8, 2025, DOE introduced a policy capping indirect and employee benefit costs at 10% of each project’s budget regardless of previous agreements.
According to officials involved in the lawsuit, if this cap remains in place it could force reductions in staffing and operations for key state energy programs. This could result in delays or cancellations of projects aimed at improving energy efficiency or expanding renewable power sources. In California specifically, millions of dollars could be denied to initiatives under the State Energy Program due to these new rules.
The attorneys general claim that DOE’s policy violates federal regulations requiring negotiated cost rates between states and federal agencies. They also note that similar caps have been overturned by federal courts as unlawful and disruptive.
Joining Attorney General Bonta in this legal action are attorneys general from Colorado, Connecticut, Delaware, Hawai’i, Illinois, Maine, Maryland, Michigan, Minnesota, Nevada, New Mexico, New York, North Carolina, Oregon, Washington, Wisconsin; the District of Columbia; as well as governors from Kentucky and Pennsylvania.
A copy of the lawsuit can be found here.
